UPDATE Q2. Group Quarterly Report Q2/2011. of CENTROSOLAR Group AG, Munich

Transcription

1 UPDATE Q2 Group Quarterly Report Q2/2011 of CENTROSOLAR Group AG, Munich

2 Key Figures Change P&L TEUR % Revenue TEUR % Revenue Revenue 150, % 209, % -28.1% Gross profit 41, % 67, % -37.4% EBIT (adjusted) * (4,067) -2.7% 22, % n.a. EBITDA (587) -0.4% 25, % n.a. EBIT (4,910) -3.3% 21, % n.a. EAT attributable to shareholders (6,469) -4.3% 12, % n.a Change Cash Flow Statement TEUR % Revenue TEUR % Revenue Cash Flow I (EAT + depreciation/amortisation) (2,146) -1.4% 16, % n.a. Cash Flow from operating activities (34,509) -22.9% 6, % n.a. Cash Flow from investing activities (13,184) -8.8% (4,207) -2.0% 213.4% Change Balance Sheet TEUR % Total TEUR % Total Net Working Capital 72, % 42, % 71.1% Net Operating Working Capital 91, % 56, % 61.3% Fixed Assets 102, % 93, % 9.5% thereof Goodwill 49, % 49, % 0.0% Net cash (87,785) -35.5% (39,875) -21.6% 120.2% Shareholders equity 89, % 95, % -6.5% Balance sheet total 247, % 184, % 33.8% Shares and EPS Number of shares (weighted average outstanding; basic) 20,333,309 20,333,309 EPS (in EUR; basic) Year-high Year-low Share price in EUR Employees Change Average total (in FTE) 1,100 1, % Q2 CENTROSOLAR Key Figures

3 INTERNATIONALLY SUCCESSFUL. EUROPE Locations USA / CANADA Locations

4 SOLAR EXPERTS FOR THE ROOF. Product overview n Photovoltaic solar modules n Integrated PV systems n Stand-alone systems n Inverters n Plant planning system design

5 PARTNER TO THE TRADE. Everything on site, from advice to delivery of complete systems.

6 QUALITY MADE IN GERMANY. Our production: efficient and high-quality

7 INNOVATIVE IN DETAIL. Anti-reflective nanocoated solar glass In-roof and on-roof mounting solutions

8 Highlights First half closes with revenue of EUR million (previous year EUR million); Q2 revenue reaches EUR 79.3 million (previous year EUR million) Sales volume (in MWp) in the core activities of small roof systems slightly increased despite weak market trends in Germany, Italy and France Sharp drop in prices and low volume of project activities main driver for decline in revenue Further headway made with spreading revenue basis over several markets Revenue EBIT of EUR -4.9 million for first half, compared with EUR 21.1 million in prior-year period; within the second quarter EBIT of EUR -5.2 million compared with EUR 12.9 million in prior-year period Price deterioration in second quarter temporarily depressing gross margin as well as diminishing revenue Start-up losses in North America and from launch of new products in mounting systems area Core business in Europe remains profitable Earnings Q2 CENTROSOLAR Group Management Report Strong demand expected from September onwards - New regulation in Italy beneficial for CENTROSOLAR - Higher rates of return for PV will lift demand in Germany - Thanks to its expertise in the preferentially regulated segment roof, CENTROSOLAR is affected less severely by cutbacks in France - Usual seasonal rise in demand expected after the still weak holiday months of July and August Basis for further growth established: - Partnership with TSMC opens up new sales channel - Expansion of sales organisation in North America - Extended product range for mounting systems - New production location in China provides access to solar glass market in Asia - Financing of growth secured through placement of EUR 50 million bond With its focus on roof business, CENTROSOLAR operates in the most stable market segment Revenue expectations of EUR 330 to 380 million, with positive EBIT Outlook Highlights 1

9 Summary Q2 CENTROSOLAR Group Management Report Deteriorating prices in second quarter positive outlook CENTROSOLAR ended the first half with revenue of EUR million (previous year EUR million). The second quarter in particular (revenue EUR 79.3 million, as against EUR million in previous year) saw a substantial decline in market prices which temporarily weighed on revenue and earnings. The fall in prices was triggered by the Italian government effectively suspending financial incentives for solar systems for 2-3 months in March. In Germany, too, demand has remained weak in the year to date. Although CENTROSOLAR has succeeded in increasing its market shares and even slightly expanding its sales volumes for solar modules and complete systems in its core activities, it has nevertheless seen its revenue as a whole fall. As well as having an impact on revenue, the falling prices also diminished the gross margin. This, combined with the costs of expansion in North America and costs of expanding the mounting systems product range, led to a negative first-half operating result of EUR -4.9 million compared with EUR 21.1 million in the first half of The operating result (EBIT) for the second quarter came to EUR -5.2 million compared with EUR 12.9 million in the previous year. Earnings per share were correspondingly EUR for the first half (prior-year period EUR 0.64). The core business operations in Europe remained profitable despite the weak market. However, it was no longer able to make good the start-up losses from expansion in North America and the costs for expanding the mounting systems product range. At the same time, the company is able to look to the second half of 2011 with optimism: Although the overall market situation has not yet improved noticeably, the price cuts now offer the prospect of attractive rates of return for operators of photovoltaic (PV) systems; from the late summer on, this should translate into corresponding demand especially for roof-mounted solar systems CENTROSOLAR s core product. Furthermore, CENTROSOLAR has been registering rising interest in roof solar systems in Italy since June, now that they are granted preferential financial incentives there. Revenue has also been on the rise in the UK, Belgium and the USA. Because the purchase prices of solar cells have also fallen, CENTROSOLAR stands to benefit from its flexible purchasing strategy. With market prices currently stabilising, a marked improvement on the earnings side is also expected in the second half. For the year as a whole, CENTROSOLAR expects revenue of EUR 330 to 380 million with a positive operating result. Temporary dip in revenue and earnings from declining price Earnings diminished by falling prices and expansion expenses Core business in Europe profitable Positive outlook: Demand picks up More stable prices will improve margins Positive operating result expected Summary 2

10 Important events Q2 CENTROSOLAR Group Management Report On January 11, 2011 CENTROSOLAR announced the signing of a production agreement with TSMC Limited, Taiwan. Under the terms of the agreement CENTROSOLAR is to become TSMC s exclusive manufacturer of crystalline solar modules in Europe. TSMC is the world s biggest contract manufacturer of semiconductors and a leading player in terms of process engineering and quality. The agreement, which runs for five years, envisages a volume of initially 100 MWp per year. More extensive cooperation in the areas of product development and process engineering has now also been agreed. The first deliveries under the agreement are due in the third quarter of The solar cells to be used will be supplied by TSMC itself; CENTROSOLAR will be responsible for transforming the cells into 60-cell quality modules. The increased capacity needed as a result of both the agreement with TSMC and the long-term growth in CENTROSOLAR s core business will be created by further expanding the production facility in Wismar, Germany. The construction of a new production hall and warehouse will create space for upping the existing capacity from currently 200 MWp to up to 500 MWp per year in line with demand. This will equip the company for further growth from both its own business and from contract manufacturing. In the first phase, which is to be completed by the third quarter of 2011, an additional 150 MWp of manufacturing capacity will be realized, of which 100 MWp will be used to fulfil the TSMC contract. The investment volume for the first phase amounts to around EUR 20 million. Subsidies and bank loans are being used in its financing. In February 2011 CENTROSOLAR Group AG issued and placed bearer bonds (WKN A1E85T) with a volume of EUR 50,000,000 and a term of five years by way of a public offering in Germany and Austria. The corporate bond accrues interest at 7.00% p.a. The bearer bonds have been included the regulated unofficial market at Stuttgart Stock Exchange. The corporate bond is intended to accelerate the company s successful progress along its growth pathway. Now that CENTROSOLAR has already established itself as one of the leading suppliers of solar roof systems for private houses in Europe, it has plans to extend its successful business model to other markets. For instance, the branch in the United States that has been steadily expanded since 2007 is earmarked for a further expansive boost. The increasingly strong project segment dealing with solar installations on industrial roofs is also to be stepped up internationally. This expansion should further consolidate the overall group s broad basis in several highly promising market segments. For the bond issue, Creditreform Rating AG has issued a current rating of CENTROSOLAR Group AG and assessed the company as investment grade BBB. CENTROSOLAR becomes exclusive manufacturer of modules for TSMC in Europe with volume of 100 MWp p.a. Production capacity at Wismar being increased from 200 MWp to 350 MWp Successful placement of a EUR 50 million bearer bond Important events 3

11 On May 18, 2011 Centrosolar AG signed a licence agreement with Zep Solar, Inc., San Rafael (California, USA). Zep supplies a concept for a module frame that can be installed with particular ease and speed. CENTROSOLAR will manufacture the Zep-compatible modules at its own production facilities in Wismar (Germany). In addition, both companies have agreed to cooperate closely on the development and marketing of Zep s products in Europe. For the time being, Centrosolar will be the only German solar manufacturer of Zep systems. New mounting concept At Intersolar Europe, CENTROSOLAR unveiled a combined system of photovoltaics and heat pump built in partnership with Glen Dimplex Deutschland GmbH. The heat pump uses the waste heat present in the ambient air as its energy source. The appliance runs approximately 3/4 on environmental energy and 1/4 on electricity. The electricity is supplied by a CENTROSOLAR photovoltaic system ( Cenpac ). At the heart of the system is an intelligent energy manager that ensures that the power required is drawn during the main hours of sunlight. The system beats conventional solar thermal systems for heating water for domestic use in terms of cost and efficiency. New products Also showcased at Intersolar Europe was another version of the wellestablished Console flat-roof system, which has now been on the market for 15 years. The new Console + features a shallower angle for the modules, allowing them to be packed more densely on the roof and reducing them amount of ballast required. The familiar advantages of extremely rapid installation and mounting without puncturing the roof membrane are preserved. The equally new Ceniq flat-roof mounting system is the right solution for foil roofs with extremely low roof loads (specific weight of less than 10 kilograms per square metre, depending on location). Ceniq, too, avoids damage to the roof membrane. At Intersolar North America, a Console version for roofs in the USA was exhibited. The design of the flat-roof system that is very well known in Europe has been modified to reflect US requirements, permitting a high power yield with little ballast. Q2 CENTROSOLAR Group Management Report CENTROSOLAR has commissioned a first line for the anti-reflective coating of solar glass in Huzhou, China, at a partner company that has been operating a glass melting furnace there on behalf of Centrosolar Glas GmbH & Co. KG since The new production line has an annual capacity of 1.8 million m 2 and will enable CENTROSOLAR to supply this product to customers in the Far East with immediate effect. There are no plans for imports into Europe, AR glass production for Far East starts up Important events 4

12 Economic conditions General economic situation According to an analysis by the Centre for Economic Research (CER), business activity in Europe is still relatively healthy, though economic expectations deteriorated markedly, particularly in July. The CER assesses Germany s decision to withdraw from nuclear power and bring about a sea change on energy as practicable, but concludes that it will lead to higher electricity prices. According to our own observations, however, many of the analyses used make excessively high estimates for the costs of generating solar power (to some extent above the current feed-in tariffs). Healthy economy but cautious outlook Q2 CENTROSOLAR Group Management Report General situation of the photovoltaic market The first half saw weak demand in the important sales markets Germany and Italy, accompanied by a sharp fall in prices for solar cells, modules and systems since May. - The two reductions in the feed-in tariffs in Germany on July 1, 2010 and January 1, 2011 achieved their intended effect and significantly dampened demand there. In the first five months of the year, only 1,078 MWp of new solar systems were connected to the grid, compared with 1,743 MWp in the corresponding period of the previous year. While a further 2,109 MWp was connected in June alone last year, the figure for this June is expected to be substantially lower, meaning that overall demand in Germany will probably have fallen by more than half in the first six months of the year. - While excessive feed-in tariffs generated a temporary peak in demand (and prices) in Italy at the start of the first quarter, from March onwards the market there subsequently virtually ground to a halt when the government in effect suspended the previous financial incentives and announced a new regulation to take effect from June 1, without actually specifying the terms of the financial incentives. Only after the new regulation was made public in May did project development activity stage a noticeable recovery, but this did not translate into an increased level of orders until the end of the second quarter. - In France, on the other hand, the decision to cap the market also for roof and roof-integrated solar systems caused the volume of the market being targeted to recede slightly. Nevertheless, the feed-in tariffs available in France for roof-integrated systems remain attractive. - Market growth in the USA to date has fallen short of expectations. One of the problems being encountered is how to finance solar systems; leasing concepts will therefore become increasingly common. Furthermore, the weak overall economy and the imminent national insolvency until the end of July caused private and Weak demand and sharp fall in prices in first half Economic conditions 5

13 institutional investors to remain cautious. - The price movements of solar modules and cells remained relatively stable throughout the first quarter. The announcement of the cutbacks in Italy prompted a sharp fall in prices at the end of March, with the downward trend slowing at the end of Q2. Module price reductions in some cases of more than 20% were observed particularly among Asian suppliers. Price reductions of occasionally more than 30% were achieved for bought-in solar cells. The sharp fall in prices substantially boosts the rates of return for solar systems; from the company's point of view this will lead to a marked upturn in demand in the second half, especially as the regulatory basis in Italy and Germany is expected to be better than a few months ago: - Low demand in the months March to May meant that no additional reduction in the feed-in tariff in Germany was applied on July 1. All the same, there has been a marked fall in prices in recent weeks and months. In the second half, the rates of return on investments in solar systems will therefore almost match the level of the record year In Italy, the new regulation was finalised on May 5 and, despite considerable cuts in the feed-in tariff, it still offers the most attractive conditions in Europe for roof systems. For the first time, systems with over 60% European components receive preferential treatment. Roof-integrated systems moreover attract an additional bonus. This regulation is likely to prompt a rapid revival in the Italian market in the second half and lead to increased demand for roof solar systems. CENTROSOLAR serves particularly this segment with its European production. - These forecasts need to be qualified by the observation that the anticipated revival in the market, especially in Germany, has not yet materialized at the time of writing this report. The summer months tend to bring a lower level of activity because of the holiday season, so the positive expectation voiced above remains valid. Strong second-half sales performance expected Q2 CENTROSOLAR Group Management Report Economic conditions 6

14 Business performance of the group Financial performance Q2 CENTROSOLAR Group Management Report 30/06/ /06/2010 Income Statement EUR 000 EUR 000 Change Revenue 150, ,227-28% Gross profit 41,941 67,043-37% EBITDA ,012 n.a. EBIT -4,910 21,075 n.a. EAT attributable to shareholders -6,469 12,990 n.a. Extremely weak demand in the German sales market compared with the previous year, the capping of the market in France and the temporary collapse in demand in Italy during the second quarter are also reflected in the revenue performance of CENTROSOLAR Group AG. Overall revenue of EUR million thus represented a decrease of around 28% on the prior-year figure (EUR million). The aforementioned effects actually pushed revenue down by 36% to EUR 79.3 million in the course of the second quarter, compared with EUR million in the prior-year quarter. However, it has to be considered that revenue in the prior-year quarter was boosted by extraordinary business activities in Germany. In 2010 there was an unscheduled reduction in feed-in tariffs with effect from July 1, prompting anticipatory effects in May and June. Revenue in Germany in the first six months was correspondingly slashed by half, from EUR million in the prior-year period to EUR 56.3 million. The volatility of individual markets demonstrates the wisdom of the strategy of international diversification. This strategy continued to be pursued throughout the past six months. At EUR 94.2 million in the first half-year, 63% of all revenue came from outside Germany notwithstanding the upheaval in Italy. Despite price cuts and downturns, the prior-year figure of EUR 94.7 million (or an export ratio of 49%) was held steady in value terms, and actually represented significantly increased sales volume. Notable progress was achieved in various new sales markets. In the UK, the newly established sales office generated revenue of EUR 4.9 million, compared with EUR 0.4 million in the prior-year period. In Belgium, revenue was more than doubled from EUR 1.4 million to EUR 3.5 million. CENTROSOLAR s most concerted efforts to expand are being made in North America. In the medium term it is expected to become the largest single market for photovoltaics. Since 2007, CENTROSOLAR has been developing a subsidiary that markets modules and systems. This year, the Console mounting system was also launched in the USA. Revenue in the USA for the Solar Integrated Systems segment rose by more than 60% from EUR 3.2 million to EUR 5.2 million. Revenue for Solar Key Components, however, tumbled from EUR 3.8 million to EUR 1.4 million due to the loss of the former glass customer Evergreen, which stopped its production. Key figures Weak market in Germany and temporary collapse in Italy Business performance of the group 7

15 The revenue contributions of the segments remained roughly the same. The Solar Integrated Systems segment contributed EUR million or 76% of total revenue from third parties, and Solar Key Components EUR 35.7 million or 24% (prior-year period EUR million / 75% and EUR 51.6 million/25%). Glass business in the Solar Key Components segment was largely running at full capacity. Nevertheless, bottlenecks in the procurement of raw glass put a degree of pressure on earnings at the start of the year. In the mounting systems area, changes in the regulations for roof-integrated systems in France led to a clear downturn in business. As a result of the difficult market environment, it was not possible to achieve positive earnings before interest and taxes (EBIT). EBIT coming in at EUR -4.9 million was sharply down on the very good prior-year figure of EUR 22.1 million. Within the second quarter, the EBIT shortfall was EUR -5.2 million compared with EUR 12.9 million in the equivalent period of The falls in revenue in the core markets, the high cell purchase prices in the first quarter which were correspondingly on our inventory at the start of the second quarter and the reversal for mounting systems in France severely weakened the profit margins for core business. Nevertheless, excluding the expansion investments the European core business activities were slightly profitable. Expansion in North America in particular generated first-half losses (in the USA and to a minor extent also in Europe) of EUR 3.0 million. In addition, various new products were launched in the mounting systems area, again leading to losses of slightly more than EUR 2 million. Net interest changed from EUR -1.9 million to EUR -3.4 million following issuance of the corporate bond and utilisation of credit lines in the first six months of the year. After a deferred tax income of EUR million mainly in the form of deferred tax credits, net earnings thus came to EUR -6.5 million (prior-year period EUR 13.0 million). Earnings per share were EUR -0.32, as opposed to EUR 0.64 in the prior-year period. Pressure on first-half result Q2 CENTROSOLAR Group Management Report Net worth and financial position 30/06/ /06/2010 Cash Flow Statement EUR 000 EUR 000 Change Cash flow from operating activities -34,509 6,034 n.a Cash flow from investing activities -13,184-4, % 30/06/ /12/2010 Balance Sheet EUR 000 EUR 000 Change Net operating working capital 91,495 56,721 61% Net financial position -87,785-39, % Shareholders equity 89,398 95, % Key figures Business performance of the group 8

16 Background: Due to seasonal factors, working capital is usually much higher during the year than at December 31. In particular at the end of 2010, before the start of a two-week production shutdown over the new year, inventories were reduced to a minimum level of EUR 51.7 million. The comparative figure for trade receivables is likewise regularly very low at year-end (December 31, 2010: EUR 19.2 million) because there are only few deliveries to customers in the final two weeks of December. The inventories merit particular attention because they can lead to extra costs, especially in a phase of relatively sharp price falls. Levels here were increased up until the end of the first quarter in expectation of rising revenue, but there was then no outflow of stock at the rate expected. However, by restricting production output inventories were reduced by EUR 13.2 million, from EUR 76.8 million at the end of the first quarter to a normal level of only EUR 63.1 million. The reduction in inventories compared with Q1 was largely offset by a sharp rise in receivables. Trade receivables were up EUR 29.9 million on the level at March 31, 2011 to EUR 42.0 million. This rise is extensively attributable to a sharp rise in revenue in June compared with the preceding months. Overall, net operating working capital rose to EUR 91.5 million. There was correspondingly a negative cash flow from operating activities of EUR million. In conjunction with the cash flow from investing activities of EUR million, largely for increasing capacity at Wismar, the net financial position expanded by EUR 47.9 million to EUR 87.8 million. Notwithstanding the increase in net operating working capital, CENTROSOLAR s financial position is very robust, thanks in no small measure to the successful placement of a EUR 50 million bond in the past quarter. At the reporting date, the companies in the group were furthermore able to draw on credit lines amounting to EUR 12.0 million to finance working capital. Cash and cash equivalents of EUR 19.8 million were also available. The equity ratio at the end of the first half was 36.2%. Seasonal increase in working capital Robust financial position Q2 CENTROSOLAR Group Management Report Business performance of the group 9

17 Business performance of operating segments Q2 CENTROSOLAR Group Management Report Solar Integrated Systems On the back of a weak first quarter in Germany, from March onwards demand virtually ground to a halt in Italy. Cutbacks in France also had an adverse impact. Despite the pronounced contraction in the market, CENTROSOLAR was able to slightly increase sales volume in the area of small roof systems from 61 MWp to 62 MWp. Sales volumes in the project activities with commercial roofs were considerably lower due to the previous year s anticipatory effects, so that the total volume declined by 15% from 75 MWp to 64 MWp. Overall, it thus proved an advantage that CENTROSOLAR has built up a relatively stable customer base by having long specialised in roof systems. An analysis of the German market revealed that CENTROSOLAR virtually doubled its market share in the first five months. Over and above the fall in volume, deteriorating prices also had a negative impact on revenue. In particular with financial incentives in Italy effectively suspended from March on, there were a number of price reductions which resulted in lower revenue coupled with reduced gross profit. Revenue overall for this segment fell by 27%, from EUR million in the prior-year period to EUR million. While CENTROSOLAR experienced a halving of its revenue in this segment in Germany, revenue outside Germany was actually increased despite falling prices. Accordingly, a number of international markets brought substantial rises, most notably Benelux, Spain, the UK and even Italy (despite its periodic inactivity). Revenue was also increased in the USA. Export revenue in this segment was up from EUR 61.0 million to EUR 70.4 million, now accounting for 61.4% of the total for the segment. The gross profit for the segment has fallen to currently 21.4% of revenue, from 25.7% of revenue in the previous year s corresponding period. The sharp price reductions in the second quarter had an impact on gross profit to the extent that part of gross profit was eaten up by lower prices over the time it takes to process solar cells into a saleable state as a finished module. As soon as prices stabilise at a lower level we expect the gross margin to recover, especially as the prices of both the solar modules and the bought-in solar cells have fallen significantly. The operating result before interest and taxes (EBIT) reached EUR -3.4 million (previous year EUR 12.5 million). Along with the reduced gross margin, revenue was down year on year, but the sales network was simultaneously expanded significantly in various markets, especially in the USA. Of the EUR 3.0 million in expansion-related losses in the USA, this segment accounted for EUR 2.5 million. The start-up costs of international expansion and negative economies of scale thus meant that personnel expenses and payroll-related operating expenses were much higher in proportion to revenue. Weak demand Market shares increased Falling prices reduce revenue Internationalisation stepped up Price falls temporarily weigh on gross margin EBIT margin suffers from negative economies of scale for sales organisation Business performance of operating segments 10

18 Seasonal factors meant that working capital at June 30, 2011 showed a rise on the position at the end of However, compared with March 31, 2011 inventories were reduced from EUR 64.2 million to just EUR 49.8 million. On balance, net operating working capital nevertheless hardly changed from March 31 mainly because receivables were higher for revenue reasons and trade debt was lower because of the slightly restricted volume of purchasing and production. Capital expenditure of EUR 11.8 million in the first half (2010: EUR 3.5 million) was mainly for the construction of the second production plant in Wismar. A portion of the outlay will be refinanced in the third quarter by an advance payment by an OEM customer. Inventories down significantly on March level Q2 CENTROSOLAR Group Management Report Business performance of operating segments 11

19 Q2 CENTROSOLAR Group Management Report Solar Key Components The Solar Key Components segment continues to enjoy high demand for anti-reflective coated solar glass. Although glass prices, too, have fallen compared with last year, the increase in volume compensated for this effect. For mounting systems, revenue with Renusol integrated mounting systems in France largely evaporated because of a change in the regulatory requirements applicable to such systems. The loss of business for integrated mounting systems was, however, compensated for by a partial shift in demand away from such systems to integrated modules (translating into increased business for the Solar Integrated Systems segment). Revenue for Renusol s other products for flat and sloping roofs actually rose despite the generally weak demand. This is reflected in a fall in revenue from EUR 63.8 million in the previous year to EUR 40.9 million in the first half of the current year. The international share of revenue remained largely constant at 66%, but now comes from much more diverse sources. While France was still easily the largest sales market in the previous year, with 22% of external revenue, France s 7% share of revenue in the first half of this year is comparable to those of South Africa, Spain and the UK. The revenue share of the Philippines also deserves mention, having now risen to 9%. In future, demand for glass there will be met directly from the new glass plant in the Far East. Renusol has responded to the loss of the market for its integration system in France by launching a broad-based product drive. It primarily involves newly designed product versions for flat roofs, an extended range for sloping roofs, a very attractively priced system for metal roofs and of course a new solution for roof integration that has been further optically enhanced. Correspondingly, due to the expansion of the offered product range of mounting systems temporary losses amounting to more than EUR 2 million were incurred. With lower revenue for the segment coupled with a broadly unchanged gross margin (i.e. a volume-driven fall in gross profit) a restructuringrelated, reduced EBIT for the segment of EUR -1.4 million for the first half (previous year EUR 9.0 million) had to be accepted temporarily. In the Solar Key Components segment, too, working capital is higher than at year-end for seasonal reasons. Compared with the figure at March 31, 2011 receivables in particular were higher; this was caused by the higher revenue total for June compared to May and April. Overall, net operating working capital at June 30, 2011 amounted to EUR 21.9 million. Glass business stable; one mounting product discontinued Internationalisation stepped up New product drive at Renusol Restructuring leads to negative EBIT Seasonal rise in net working capital Business performance of operating segments 12

20 CENTROSOLAR shares Xetra Schlusskurse EUR Börsenkurs zum Stichtag 4,10 Höchster Kurs im Berichtszeitraum 6,23 Niedrigster Kurs im Berichtszeitraum 4,04 Source: Comdirect Q2 CENTROSOLAR Group Management Report Whereas both the TecDAX (the share index of German technology companies) and the industry index Photovoltaik Global 30 had made substantial gains in the first quarter, the second quarter saw a substantial fall in trading prices. The TecDAX had fallen back down to around the level of the start of the year at the end of the first half, but the shares of companies in the photovoltaic index suffered a much sharper reversal. Overall, the Photovoltaik Global 30 index shed almost 20% in the first six months of the current year. Until April, CENTROSOLAR shares were able to stave off the general trend in the Photovoltaik Global 30 index but subsequently likewise came under considerable pressure and closed the first half at EUR 4.04, around 21% down on the start of the year, a similar overall fall compared with the benchmark index. Share price performance CENTROSOLAR shares 13

21 Risks and opportunities position As matters stand, the opportunities and risks presented in the CENTROSOLAR Group Management Report at December 31, 2010 remain valid. The principal areas of risk accordingly include procurement risks, the risks of expansion and international diversification, dependence on state subsidies, exposure to fluctuating prices and interest rates as well as exchange rate risks, production equipment failure, the loss of wellqualified employees and managers, quality and advance payment risks in respect of suppliers, non-payment risks, and financial risks. Opportunities and risks from 2010 Group Management Report remain valid Opportunities continue to arise as a result of the strong international position as well as the ongoing strategy of expansion, the focus on the roof segment (which attracts preferential financial incentives), the patented key components, the highly cost-effective production process for solar modules and improved purchasing terms. The principal new risks and opportunities are commented on below. Risks The new feed-in tariff passed in Italy in May harbours both opportunities and risks. While the opportunities it offers predominate from CENTROSOLAR s point of view, there also exist potential risks: - The regulation envisages a monthly reduction in the feed-in tariff, which implies comparatively sharp cuts particularly in the months November and December. This could therefore lead to anticipatory effects that could temporarily lead to limited availability of cells or other system components especially if there is an upswing in demand in Germany and other markets. - The monthly reduction in the feed-in tariff should also translate into a gradual fall in system prices. The resulting drop in prices could necessitate write-downs where there are high inventories. Potential procurement bottlenecks Q2 CENTROSOLAR Group Management Report CENTROSOLAR addresses these risks by concluding purchase agreements for cells and key components based on flexible prices, and practising rigorous stock management. Sales activities in other European and North American solar markets are furthermore being stepped up significantly in order to reduce dependence on individual solar markets. In Germany, the sea change on energy resolved (which includes phasing out nuclear power) offers opportunities for photovoltaics. All the same, there are signs that the current governing coalition prefers central forms of energy generation to non-central forms, of which photovoltaics is a prime example. This could be reflected negatively in the next amendment to the Renewable Energies Act scheduled for Due to its business structure CENTROSOLAR only has a very shortterm order backlog. Therefore, the expected boost in demand in the autumn is not yet visible in the order backlog. There is a risk that Political risk Accuracy of forecasts Risks and opportunities position 14

22 demand will actually not recover in the autumn. Currently, the financial markets are once again experiencing a stage of weakness. If this turns into a full-blown crisis, the risks already depicted during the financial market crisis in 2008 will become more relevant again. This potentially includes banks limited willingness to grant loans, limited willingness to invest in solar power and overall economic risks. CENTROSOLAR was able to reduce its dependency on banks with the issuance of a corporate bond, amongst others. Financial market weakness Opportunities The marked reduction in system prices and the decision not to impose a one-off reduction in the tariff in Germany from July 1 means that solar systems represent an investment offering attractive rates of return; this may lead to a healthy surge in demand in the second half of If demand in Germany falls short of the previously expected levels for the full-year 2011 as well, the reduction in the feed-in tariff at the end of the year will be less than projected which should have a positive impact on demand in The new regulation in Italy envisages preferential financial incentives for roof systems, roof-integrated systems as well as systems containing a high proportion of European components. As a specialist for roof systems and a cost leader for module manufacturing in Europe, CENTROSOLAR could benefit particularly here. The continuing increase in production capacities at all stages of the value chain ought to ease the situation in the cell procurement market, from which CENTROSOLAR plans to benefit thanks to its flexible purchasing policy. The partnership announced in May with a European glass supplier in China now gives Centrosolar Glas GmbH & Co. KG its first foothold in the world s biggest, and hitherto largely untapped, market for antireflective glass. This offers fresh potential for growth and profit. Demand in Germany fuelled by high rates of return Preferential financial incentives for roof systems in Italy Easing of situation in procurement market AR glass market in China accessed Q2 CENTROSOLAR Group Management Report Risks and opportunities position 15

23 Outlook Q2 CENTROSOLAR Group Management Report Revenue and earnings forecasts CENTROSOLAR expects a seasonal pattern to the current financial year, with demand climbing in the second half of the year. - The new regulation in Italy means a revival in the market is to be expected. - The absence of a cutback in the feed-in tariff in Germany mid-way through the year, in conjunction with the significantly reduced prices of systems, should make for a strong second half to the year. The increased demand is expected to start materializing in September after the holiday season. - Whereas the French market as a whole is likely to be rather weaker than in the first half, demand for smaller roof systems CENTROSOLAR s core sales area will probably be down only slightly. - In many other markets such as the USA, UK and Benelux, a typical seasonal pattern with revenue peaks towards the end of the year is to be expected. Whereas CENTROSOLAR s unit sales remain relatively stable, the unexpectedly sharp fall in prices is having an adverse effect on the revenue performance. In light of this fact, CENTROSOLAR now expects revenue to be down on the prior-year level corresponding to a level around EUR million. The distinct phase of falling prices coupled with a still-low level of demand in the second quarter meant that operating margins were temporarily lower than had been expected at the start of the year, because of the need to shift inventories with a higher paper value and the time lag between production and sale. It was consequently not possible to recoup the costs of expansion in the first half. At the same time, the low price of cells and the oversupply at upstream stages of the value chain also provide opportunities for CENTROSOLAR thanks to its flexible purchasing strategy; this should translate into attractive profits in the second half. The anticipated rise in demand should furthermore mean that the economies of scale in the Solar Integrated Systems segment translate into an improved operating result. In light of the weak first half and the continuing difficulty in forecasting seasonal business for the autumn, CENTROSOLAR is downgrading its EBIT forecast but continues to expect a positive operating result. Strong seasonal business expected in autumn 2011 revenue expectations EUR Positive EBIT expected Outlook 16

24 Consolidated Balance Sheet ASSETS TEUR TEUR Non current assets Goodwill 49,429 49,429 Other intangible assets 4,515 5,275 Property, plant and equipment 48,795 39,154 Financial investments accounted for using the equity method 0 0 Other loans and other financial investments accounted for using the cost method 1,016 1,027 Deferred tax 4,284 2, ,039 97,250 Current assets Inventories 63,060 51,720 Trade account receivables 42,044 19,119 Other assets 13,771 7,829 Income tax receivable Cash and cash equivalents 19,819 8, ,026 87,448 Assets 247, ,698 Q2 CENTROSOLAR Financials Financials 1

25 Consolidated Balance Sheet EQUITY AND LIABILITIES TEUR TEUR Shareholders` equity Share capital 20,351 20,333 Additional paid-in-capital 81,239 81,228 Other reserves Share benefit reserve 1,523 1,251 Currency translation difference (590 ) (579 ) Retained earnings and other Reserves (6,656 ) (22,416 ) Profit attributable to share capital holders of CENTROSOLAR Group AG (6,469 ) 15,760 89,398 95,577 Non current liabilities Pension accruals 1,252 1,107 Other accruals 1,698 1,503 Financial liabilities 77,459 31,122 Other liabilities 6 42 Derivative financial instruments 0 51 Deferred tax 869 1,670 81,284 35,495 Current liabilities Other accruals Financial liabilities 30,159 16,976 Trade account payable 16,156 13,118 Income tax payable 6,233 7,097 Other liabilities 23,150 15,487 Derivative financial instruments ,384 53,626 Q2 CENTROSOLAR Financials Equity and Liabilities 247, ,698 Financials 2

26 Consolidated Income Statement Income Statement TEUR TEUR Revenues 150, ,227 Cost of purchased materials and services (117,612 ) (144,238 ) Changes in inventories of finished goods and work in progress 9,079 2,054 Production for own fixed assets capitalized Other operating income 2,403 1,086 Personnel expenses (21,615 ) (18,099 ) Other operating expenses (23,745 ) (25,126 ) EBITDA (587 ) 25,012 Depreciation and amortisation (4,323 ) (3,937 ) Operating income (EBIT) (4,910 ) 21,075 Interest income Interest expenses (3,692 ) (2,207 ) Profit/Losses from financial investments Result before income taxes (EBT) (8,362 ) 19,162 Income tax 1,892 (6,172 ) Net loss/income (EAT) (6,469 ) 12,990 Profit or loss attributable to share capital holders of CENTROSOLAR Group AG (6,469 ) 12,990 Q2 CENTROSOLAR Financials EPS (Earnings per share in EUR) Earnings per share (basic) Earnings per share (diluted) Weighted average shares outstanding (in numbers; basic) 20,337,378 20,333,309 Weighted average shares outstanding (in numbers; diluted) 20,417,738 20,394,607 Financials 3

27 Statement of Comprehensive Income TEUR TEUR Net income (EAT) (6,469 ) 12,990 Currency translation differences (10 ) 295 Comprehensive income (6,480 ) 13,285 Comprehensive income attributable to share capital holders of CENTROSOLAR Group AG (6,480 ) 13,285 Q2 CENTROSOLAR Financials Financials 4

28 Consolidated Income Statement Income Statement TEUR TEUR Revenues 79, ,221 Cost of purchased materials and services (67,241 ) (87,406 ) Changes in inventories of finished goods and work in progress 6,387 1,562 Production for own fixed assets capitalized Other operating income 1, Personnel expenses (10,825 ) (9,533 ) Other operating expenses (12,224 ) (14,396 ) EBITDA (3,004 ) 14,958 Depreciation and amortisation (2,214 ) (2,038 ) Operating income (EBIT) (5,218 ) 12,920 Interest income Interest expenses (2,483 ) (1,105 ) Profit/Losses from financial investments 14 0 Result before income taxes (EBT) (7,547 ) 12,018 Income tax 1,829 (3,439 ) Net loss/income (EAT) (5,718 ) 8,579 Non controlling interests 0 0 Profit or loss attributable to share capital holders of CENTROSOLAR Group AG (5,718 ) 8,579 Q2 CENTROSOLAR Financials Financials 5

29 Consolidated Cash Flow Statement TEUR TEUR Operating income (EBIT) (4,910) 21,075 Depreciation 4,323 3,937 Loss on disposal of non-current assets 27 (1) Other non-cash items Increase/decrease in provisions 105 3,046 Increase/decrease in trade payables and other liabilities that cannot be allocated to investing or financing activities (40,609) (19,103) Increase/decrease in trade payables and other liabilities that cannot be allocated to investing or financing activities cannot be allocated to investing or financing activities 9,313 1,784 Interests received and paid (1,880) (2,752) Income taxes paid (1,454) (1,953) Cash Flow from operating activities (34,509) 6,034 Acquisition of share in participations - net of cash acquired 0 (600) Purchase of property, plant and equipment/intangible assets (13,201) (3,666) Proceeds from disposal of property, plant and equipment/intangible assets Cash Flow from investing activities (13,184) (4,207) Proceeds from issuance of shares 25 (0) Proceeds from borrowings 48,622 5,189 Repayments of borrowings (5,487) (6,886) Dividends paid/received 14 0 Cash Flow from financing activities 43,173 (1,697) Q2 CENTROSOLAR Financials Change in liquid funds* (4,520) 130 Liquid funds at the beginning of the financial year 1,568 6,384 Currency translation difference liquid funds 7 0 Liquid funds at the end of the quarter (2,945) 6,514 * Liquid funds deducted of credits current account Financials 6

30 Statement of Movements in Equity Additional paid-in capital Share stock options reserve Currency translation difference Retained earnings and profit carryforward Non controlling interests Profit attributable to shareholder Consolidated equity Share capital Statement of Movement in Equity TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR December 31, ,333 80,381 1,070 (492) 7,289 (29,705) 0 78,877 Payment in revenue reserves (29,705) 29, Deferred taxes Share option plan Comprehensive income (87) 0 15, ,673 December 31, ,333 81,228 1,251 (579) (22,416) 15, ,577 Payment in revenue reserves ,760 (15,760) 0 0 Change from equity increase Costs for issuing equity 0 (11) (11) Deferred taxes Share option plan Comprehensive income (10) 0 (6,469) 0 (6,480) June 30, ,351 81,239 1,523 (590) (6,656) (6,469) 0 89,398 Number of shares outstanding December 31, 2009 December 31, 2010 June 30, ,333,309 Stocks 20,333,309 Stocks 20,351,084 Stocks Q2 CENTROSOLAR Financials Financials 7

31 Q2 CENTROSOLAR Financials P&L Key Figures TEUR % of Revenue TEUR % of Revenue TEUR % of Revenue TEUR % of Revenue TEUR TEUR TEUR % of Revenue TEUR % of Revenue Revenue total 114, % 157, % 40, % 63, % (5,126) (12,227) 150, % 209, % Revenue from third parties 114, % 157, % 35, % 51, % , % 209, % Revenue from other segments 0 0.0% 1 0.0% 5, % 12, % (5,126) (12,227) 0 0.0% 0 0.0% Gross profit 24, % 40, % 17, % 26, % (70) (300) 41, % 67, % Personnel expenses (14,661) -12.8% (12,517) -7.9% (6,954) -17.0% (5,582) -8.7% 0 0 (21,615) -14.4% (18,099) -8.7% Other income and expenses (10,827) -9.4% (13,222) -8.4% (10,086) -24.7% (10,710) -16.8% (0) 0 (20,913) -13.9% (23,932) -11.4% EBITDA (950) -0.8% 14, % % 10, % (70) (300) (587) -0.4% 25, % Operative depreciation (1,627) -1.4% (1,317) -0.8% (1,843) -4.5% (1,600) -2.5% 0 (0) (3,469) -2.3% (2,917) -1.4% EBIT operative (2,576) -2.2% 13, % (1,410) -3.5% 9, % (70) (300) (4,056) -2.7% 22, % Non operative depreciation (825) -0.7% (848) -0.5% (29) -0.1% (172) -0.3% 0 0 (854) -0.6% (1,020) -0.5% EBIT (3,401) -3.0% 12, % (1,439) -3.5% 8, % (70) (300) (4,910) -3.3% 21, % Revenue by regions Revenue from third parties 114, % 157, % 35, % 51, % , % 209, % Germany 44, % 96, % 12, % 17, % , % 114, % Rest of Europe 64, % 57, % 12, % 22, % , % 79, % Rest of World 6, % 3, % 11, % 11, % , % 14, % Balance sheet key figures In revenuedays In revenuedays In revenuedays In revenuedays In revenuedays compared to last closing date Net operating working capital 69, , , , (231) (171) 91, , Inventories 49,817 39,264 13,309 12,626 (66) (170) 63,060 51,720 Stock payments on account/received in advance 1,030 (1,853) 1, ,546 (1,000) Trade account receivable 30,411 14,461 13,212 4,895 (1,578) (236) 42,044 19,119 Trade account payable (11,480) (6,424) (6,089) (6,930) 1, (16,156) (13,118) Financial assets 8,675 8, (7,695) (7,596) 1,016 1,027 Tangible and intangible assets 82,852 73,539 19,786 20, ,739 93,857 operative 35,355 25,227 15,923 15, ,278 41,169 Capitalized according to IFRS 3 and goodwill 47,498 48,312 3,863 4, ,461 52,688 In revenuedays Segmen nt Report Investments Total 11,792 3,495 1,455 1, ,247 4,851 Financials 8 in tangible and intangible assets 11,792 3,490 1,455 1, ,247 4,846 in financial assets